Unit B: Career and Educational Exploration Competency CM03.02 Evaluate Career Goals in terms of the experience, knowledge and skills needed to achieve them.

Objective CM03.02 Check the progression of formal and informal learning experiences toward achieving personal and career goals

Essential Questions What are the ways in which an employee can be paid? What should employees know about employment and income tax forms?

PAYDAY Have you ever worked for pay? Did you look forward to paydays? Journal Entry: List words to describe you feelings on paydays.

A Payday candy bard could serve as a symbol of monetary compensation for work. Eat Now and enjoy Trade for something else Save for later Give away Enjoy the smell

Activity Use available textbooks to search for all types of monetary and non-monetary compensations for work. List these on the handout Appendix 4.01A, “Forms of Compensation for Work,” then write an explanation and give at least one example of each. DO NOT DO!

Types of Compensation for Work Types of monetary compensation---wage, salary, commissions, tips, bonuses Wage---an amount of money paid for a specified quantity of labor Minimum wage---the lowest wage employers may legally pay workers Types of wages---full-time, part-time, flexible/seasonal, and overtime Salary-a set amount of income paid for a set period of time worked Commission-income paid as a percentage of sales made by a salesperson

Types of Compensation for Work Types of monetary compensation---wage, salary, commissions, tips, bonuses Tips-also known as gratuities-monies paid by customers to those who provide services Bonus-money in addition to base pay, either as reward for performance or as share of profit

Types of Compensation for Work Types of non-monetary compensation---also known as benefits Vacations, holidays and sick leave Insurance Savings/retirement plans Education-related benefits---tuition, credits, job training Family -related benefits---child care, maternity leave, adoption leave/support, family leave

Read the ingredients list on the label. Just as each candy slice contains some of each ingredient, so each paycheck contains specific kinds of information.

Activity Have students scan FEFE 1.13.1.F1 information sheet “Understanding Your Paycheck” and complete the graphic organizers Appendix 4.01A, “Forms of Compensation,” Appendix 4.01B, “Money In, Money Out,” and Appendix 4.01C, “Employment, Wage and Tax Forms”

Activity Have students complete the note-taking guide, FEFE 1.13.1. L1, “Understanding Your Paycheck and Tax Forms” as they view FEFE PowerPoint “Understanding your Paycheck.” Answer questions; discuss. (In advance, download a blank Form W-4 and Form I-9 from www.irs.gov). Stop at slides 12 and 13 and guide students as they complete Form W-4 and Form I-9.

Paychecks and Tax Forms Take Charge of your Finances Family Economics & Financial Education Paychecks and Tax Forms Take Charge of your Finances Changes on slide 3, 18 13

Where Does My Money Go? Almost 31% of an individual’s paycheck is deducted Taxes are the largest expense most individuals will have Therefore, it is important to understand the systematic deductions U.S. tax system operates on an ongoing payment system Taxes are immediately paid on income earned

Three methods employers may use to Paying Employees Three methods employers may use to pay employees: Paycheck – payment given with a paper check with a paycheck stub attached Most common method Employee responsible for handling the paycheck Immediately see payroll stub and deductions Added the definition of paycheck to this PowerPoint slide because it was asked for on the note taking guide 15

Paying Employees continued Direct Deposit - employers directly deposit employee’s paycheck into the authorized employee’s depository institution account Employee receives the paycheck stub detailing the paycheck deductions Most secure because there is no direct handling of the check Employee knows exactly when paycheck will be deposited and available

Paying Employees continued Payroll Card - payment electronically loaded onto a plastic card Funds are directly deposited by an employer into an account at a depository institution that is linked to the payroll card Parties involved: Employer Employee Depository institution Use the payroll card for ATM withdrawals or to make purchases

Payroll Card There are numerous fees associated with payroll cards Number of fees depends upon the depository institution Examples: Monthly or annual fee ATM fee Inactivity fee Fee after a specific number of transactions have been used Replacement fee if the card is lost, stolen , or destroyed Load fee (when funds are placed on the card account) Point of sale (POS) fee for using the card at a POS terminal, or an electronic payment processor

Benefits of Using Payroll Cards Employers Lower internal costs Costs associated with producing, handling, and distributing pay checks is eliminated Depository Institutions Profit from the fees charged to employees, employers, and merchants Employees Safer than carrying large amounts of cash Unbanked employees do not have to pay check cashing fees Americans roughly spend $8 billion annually in check cashing fees Can access electronic monthly statement of transactions Can receive a second card Give allowances to children Send money internationally Easily make online purchases

Consumer Protection with Payroll Cards Regulation E – Electronic Fund Transfer Act Protects payroll card holder from fraudulent charges on lost or stolen cards Card holder is only liable for $50 if a lost or stolen card is reported within 48 hours Over four million paychecks are stolen annually with no protection to employees Regulation E provides exceptional safety and protection for payroll card holders

Taxes Taxes – Compulsory charges imposed on citizens by local, state, and federal governments. Used to provide public goods and services. Largest amount of taxes a person pays is on his/her income. Internal Revenue Service (IRS) – Collects federal taxes, issues regulations, and enforces tax laws written by the United States Congress.

Starting a New Job To receive a paycheck, an employee must: Complete a Form W-4 Employee’s Withholding Allowance Certificate Complete a Form I-9 Employment Eligibility Verification http://www.formi9.com/form-i9-employment-verifications.aspx

Form W-4 Employee’s Withholding Allowance Certificate Allowances Determines the percentage of gross pay which will be withheld for taxes Allowances Used to determine the amount of federal taxes withheld from the paycheck A person may claim a personal allowance if no one else claims the person as a dependent Dependent – a person who relies on the taxpayer for financial support

Steps to Completing a Form W-4 Print or type legal name on Line 1 and home address directly below the name Write Social Security number on Line 2 On Line 3, check the appropriate box to indicate marital status Enter a zero on Line 5 if not claiming any allowances Sign name and date the form before giving it to the employer Keep a copy for personal records

Form I-9 Employment Eligibility Verification Form Used to verify the eligibility of individuals to avoid hiring undocumented workers or others who are not eligible to work in the United States Must provide documentation which establishes identity and employment eligibility Examples include driver’s license, passport, Social Security card, and birth certificate

Family Economics & Financial Education Reading a Paycheck

Paycheck Stub Paycheck Stub On-The-Go Employee Beakens, Joe Employee Identification 201-92-4856 Check # 164 Check Amount $1,102.98 Employee Address 293 Michael Grove Billings, MT 59102   Pay Type- Gross Pay Deductions Current Year-to-date  $1,353.33 Federal Withholding State Withholding Fed OASDI/EE or Social Security Fed MED/EE or Medicare Medical 401K $106.00 $40.82 $83.91 $19.62 $0.00 $0.00 $503.46 $117.72 $636.00 $244.92 $0.00 $0.00 Totals $250.35 $1,502.10 Pay Period 6/11/2004-7/11/2004 Paycheck Stub A document included each pay period which outlines paycheck deductions

Personal Information Personal Information On-The-Go Employee Beakens, Joe Employee Identification 201-92-4856 Check # 164 Check Amount $1,102.98 Employee Address 293 Michael Grove Billings, MT 59102   Pay Type- Gross Pay Deductions Current Year-to-date  $1,353.33 Federal Withholding State Withholding Fed OASDI/EE or Social Security Fed MED/EE or Medicare Medical 401K $106.00 $40.82 $83.91 $19.62 $0.00 $0.00 $503.46 $117.72 $636.00 $244.92 $0.00 $0.00 Totals $250.35 $1,502.10 Pay Period 6/11/2004-7/11/2004 Personal Information States the employee’s full name, address, and Social Security or Employee Identification number Always check to ensure this information is correct

Pay Period On-The-Go Employee Beakens, Joe Employee Identification 201-92-4856 Check # 164 Check Amount $1,102.98 Employee Address 293 Michael Grove Billings, MT 59102   Pay Type- Gross Pay Deductions Current Year-to-date  $1,353.33 Federal Withholding State Withholding Fed OASDI/EE or Social Security Fed MED/EE or Medicare Medical 401K $106.00 $40.82 $83.91 $19.62 $0.00 $0.00 $503.46 $117.72 $636.00 $244.92 $0.00 $0.00 Totals $250.35 $1,502.10 Pay Period 6/11/2004-7/11/2004 Pay Period The length of time for which an employee’s wages are calculated; most are weekly, bi-weekly, twice a month, or monthly The last day of the pay period is not always payday to allow a business to accurately compute wages

Gross Pay On-The-Go Employee Beakens, Joe Employee Identification 201-92-4856 Check # 164 Check Amount $1,102.98 Employee Address 293 Michael Grove Billings, MT 59102   Pay Type- Gross Pay Deductions Current Year-to-date  $1,353.33 Federal Withholding State Withholding Fed OASDI/EE or Social Security Fed MED/EE or Medicare Medical 401K $106.00 $40.82 $83.91 $19.62 $0.00 $0.00 $503.46 $117.72 $636.00 $244.92 $0.00 $0.00 Totals $250.35 $1,502.10 Pay Period 6/11/2004-7/11/2004 changed the last sentence, it used to say “If a person is on salary, it is the total salary amount divided by the specified time period” Gross Pay The total amount of money earned during a pay period before deductions This is calculated by multiplying the number of hours worked by the hourly rate If a person is on salary, it is the total salary amount divided by the specified number of pay periods 30

Net Pay On-The-Go Employee Beakens, Joe Employee Identification 201-92-4856 Check # 164 Check Amount $1,102.98 Employee Address 293 Michael Grove Billings, MT 59102   Pay Type- Gross Pay Deductions Current Year-to-date  $1,353.33 Federal Withholding State Withholding Fed OASDI/EE or Social Security Fed MED/EE or Medicare Medical 401K $106.00 $40.82 $83.91 $19.62 $0.00 $0.00 $503.46 $117.72 $636.00 $244.92 $0.00 $0.00 Totals $250.35 $1,502.10 Pay Period 6/11/2004-7/11/2004 Net Pay The amount of money left after all deductions have been withheld from the gross pay earned in the pay period

Deductions Deductions On-The-Go Employee Beakens, Joe Employee Identification 201-92-4856 Check # 164 Check Amount $1,102.98 Employee Address 293 Michael Grove Billings, MT 59102   Pay Type- Gross Pay Deductions Current Year-to-date  $1,353.33 Federal Withholding State Withholding Fed OASDI/EE or Social Security Fed MED/EE or Medicare Medical 401K $106.00 $40.82 $83.91 $19.62 $0.00 $0.00 $503.46 $117.72 $636.00 $244.92 $0.00 $0.00 Totals $250.35 $1,502.10 Pay Period 6/11/2004-7/11/2004 Deductions The amount of money subtracted from the gross pay earned for mandatory systematic taxes, employee sponsored medical benefits, and/or retirement benefits

Federal Withholding Tax On-The-Go Employee Beakens, Joe Employee Identification 201-92-4856 Check # 164 Check Amount $1,102.98 Employee Address 293 Michael Grove Billings, MT 59102   Pay Type- Gross Pay Deductions Current Year-to-date  $1,353.33 Federal Withholding State Withholding Fed OASDI/EE or Social Security Fed MED/EE or Medicare Medical 401K $106.00 $40.82 $83.91 $19.62 $0.00 $0.00 $503.46 $117.72 $636.00 $244.92 $0.00 $0.00 Totals $250.35 $1,502.10 Pay Period 6/11/2004-7/11/2004 Federal Withholding Tax The amount required by law for employers to withhold from earned wages to pay taxes The amount of money deducted depends on the amount earned and information provided on the Form W-4 Largest deduction withheld from an employee’s gross income

State Withholding Tax State Withholding Tax On-The-Go Employee Beakens, Joe Employee Identification 201-92-4856 Check # 164 Check Amount $1,102.98 Employee Address 293 Michael Grove Billings, MT 59102   Pay Type- Gross Pay Deductions Current Year-to-date  $1,353.33 Federal Withholding State Withholding Fed OASDI/EE or Social Security Fed MED/EE or Medicare Medical 401K $106.00 $40.82 $83.91 $19.62 $0.00 $0.00 $503.46 $117.72 $636.00 $244.92 $0.00 $0.00 Totals $250.35 $1,502.10 Pay Period 6/11/2004-7/11/2004 State Withholding Tax The percentage deducted from an individual’s paycheck to assist in funding government agencies within the state The percentage deducted depends on the amount of gross pay earned

FICA (Federal Insurance Contribution Act) On-The-Go Employee Beakens, Joe Employee Identification 201-92-4856 Check # 164 Check Amount $1,102.98 Employee Address 293 Michael Grove Billings, MT 59102   Pay Type- Gross Pay Deductions Current Year-to-date  $1,353.33 Federal Withholding State Withholding Fed OASDI/EE or Social Security Fed MED/EE or Medicare Medical 401K $106.00 $40.82 $83.91 $19.62 $0.00 $0.00 $503.46 $117.72 $636.00 $244.92 $0.00 $0.00 Totals $250.35 $1,502.10 Pay Period 6/11/2004-7/11/2004 FICA This tax includes two separate taxes: Fed OASDI/EE or Social Security and Fed MED/EE or Medicare These two taxes can be combined as one line item or itemized separately on a paycheck stub

Social Security Social Security On-The-Go Employee Beakens, Joe Employee Identification 201-92-4856 Check # 164 Check Amount $1,102.98 Employee Address 293 Michael Grove Billings, MT 59102   Pay Type- Gross Pay Deductions Current Year-to-date  $1,353.33 Federal Withholding State Withholding Fed OASDI/EE or Social Security Fed MED/EE or Medicare Medical 401K $106.00 $40.82 $83.91 $19.62 $0.00 $0.00 $503.46 $117.72 $636.00 $244.92 $0.00 $0.00 Totals $250.35 $1,502.10 Pay Period 6/11/2004-7/11/2004 Social Security Nation’s retirement program, helps provide retirement income for elderly and pays disability benefits Based upon a percentage (6.2%) of gross income, employer matches the contribution made by the employee

Medicare On-The-Go Employee Beakens, Joe Employee Identification 201-92-4856 Check # 164 Check Amount $1,102.98 Employee Address 293 Michael Grove Billings, MT 59102   Pay Type- Gross Pay Deductions Current Year-to-date  $1,353.33 Federal Withholding State Withholding Fed OASDI/EE or Social Security Fed MED/EE or Medicare Medical 401K $106.00 $40.82 $83.91 $19.62 $0.00 $0.00 $503.46 $117.72 $636.00 $244.92 $0.00 $0.00 Totals $250.35 $1,502.10 Pay Period 6/11/2004-7/11/2004 Medicare Nation’s health care program for the elderly and disabled, provides hospital and medical insurance to those who qualify Based upon a percentage (1.45%) of gross income

Medical On-The-Go Employee Beakens, Joe Employee Identification 201-92-4856 Check # 164 Check Amount $1,102.98 Employee Address 293 Michael Grove Billings, MT 59102   Pay Type- Gross Pay Deductions Current Year-to-date  $1,353.33 Federal Withholding State Withholding Fed OASDI/EE or Social Security Fed MED/EE or Medicare Medical 401K $106.00 $40.82 $83.91 $19.62 $0.00 $0.00 $503.46 $117.72 $636.00 $244.92 $0.00 $0.00 Totals $250.35 $1,502.10 Pay Period 6/11/2004-7/11/2004 Medical The amount taken from the employee’s paycheck for medical benefits Occurs when the employer has a medical plan for employees but does not pay full coverage for his/her benefits

Retirement Plan Retirement Plan On-The-Go Employee Beakens, Joe Employee Identification 201-92-4856 Check # 164 Check Amount $1,102.98 Employee Address 293 Michael Grove Billings, MT 59102   Pay Type- Gross Pay Deductions Current Year-to-date  $1,353.33 Federal Withholding State Withholding Fed OASDI/EE or Social Security Fed MED/EE or Medicare Medical 401K $106.00 $40.82 $83.91 $19.62 $0.00 $0.00 $503.46 $117.72 $636.00 $244.92 $0.00 $0.00 Totals $250.35 $1,502.10 Pay Period 6/11/2004-7/11/2004 Retirement Plan The amount an employee contributes each pay period to a retirement plan A specified percentage of the contribution is often matched by the employer May be a 401K, a state, or local retirement plan

Year-to-Date Year-to-Date On-The-Go Employee Beakens, Joe Employee Identification 201-92-4856 Check # 164 Check Amount $1,102.98 Employee Address 293 Michael Grove Billings, MT 59102   Pay Type- Gross Pay Deductions Current Year-to-date  $1,353.33 Federal Withholding State Withholding Fed OASDI/EE or Social Security Fed MED/EE or Medicare Medical 401K $106.00 $40.82 $83.91 $19.62 $0.00 $0.00 $503.46 $117.72 $636.00 $244.92 $0.00 $0.00 Totals $250.35 $1,502.10 Pay Period 6/11/2004-7/11/2004 Year-to-Date Total of all of the deductions which have been withheld from an individual’s paycheck from January 1 to the last day of the pay period indicated on the paycheck stub

Ways employees are paid Paycheck Traditionally, a paper document issued to an employee for services rendered Traditionally, the most common method of payment for work Employer physically provides the employee with his/her paycheck

Ways employees are paid Paycheck stub Attached to the paycheck to show the deductions Monetary deductions subtracted for mandatory systematic taxes, employee- sponsored medical benefits, and/or retirement benefits Other deductions include insurance, investments, and other fringe benefits

Contents of paycheck stub gross pay, net pay, hourly wage, hours worked, state/federal withholdings, Social Security income tax, employee’s name, Social Security number, total earned and withheld, year to date, last day of pay period

Ways employees are paid Direct deposit When employers directly deposit an employee’s paycheck into an authorized account Employee receives on payday a paycheck stub/electronic notice showing deductions This method is more secure because there is no direct handling of the check and the employee knows exactly which day paycheck will be deposited and available for use

Ways employees are paid Payroll card A prepaid card offered to employees as an alternative to paper paychecks or directly depositing wages into an employee’s financial institution account Benefits to employees Reduces or eliminates check cashing fees Offers ability to make purchases using credit card networks Offers 24-hour access to funds via ATMs; no need to wait in lines Reduces the need to carry a lot of cash Makes money transfers more easily available to families Provides a pseudo-bank account—funds do not need to be withdrawn entirely as when using a check casher

Ways employees are paid Payroll card A prepaid card offered to employees as an alternative to paper paychecks or directly depositing wages into an employee’s financial institution account Benefits to employers Reduces bank processing and check handling fees Reduces check printing costs Reduces likelihood of check fraud Reduces check reconciliation costs Increases employee productivity (no time off to cash or deposit paycheck) Reduces lost/stolen check replacement costs

Forms for work and income taxes Income taxes are taxes paid on earnings. They are known as progressive taxes; the higher the income earned, the higher the amount of taxes. In contrast, sales taxes are regressive taxes; they impose higher tax rates on those with lower incomes than those with higher.

Forms for work and income taxes Forms and materials Used when a person begins a job W-4 – the Employee’s Withholding Allowance Certificate; information provided here determines the percentage of gross pay to be withheld for taxes I-9 – the Employment Eligibility Verification form; information gathered in this form is for employers to verify eligibility of individuals for employment; helps avoid hiring undocumented workers or others who are not eligible to work in the United State

Forms for work and income taxes Forms and materials Used when filing income taxes W-2 - states amount of money earned and taxes paid through previous year Form 1040/1040A/1040EZ - common forms for filing federal income tax return 1099 Forms - Tax forms that report other sources of income earned during a tax year. 1099-INT for interest income, 1099-DIV for dividends on investments, and 1099-MISC for other sources of income

Forms for work and income taxes Forms and materials Used when filing income taxes Records of deductible expenses, including receipts and bank statements Social Security number serves two major purposes: (1) provides a record of your covered earnings for retirement and disability benefits and (2) serves as an identification number for the Internal Revenue Service

Activity Have students use the List-Group-Label literacy strategy to name the categories of terms in Appendix 4.01D, “List-Group-Label.” DO NOT DO!

Journal Entry Display the Jump$tart principle, “Know your take home pay.” Discuss the difference between gross and net pay.

Activity Distribute FEFE 1.13.1.A2, “Paycheck Stub 1” and 1.13.1.A3, “Paycheck Stub 2.” Have students work in pairs and use the KWC numeracy strategy with the Appendix 4.02E, “KWC Chart” to complete the first check stub activity. Have students work independently to complete the second check stub.

Activity Using a Twister game mat, have students play FEFE 1.13.1.J1, “Where Did All the Earnings Go?”

Activity Have students complete Appendix 4.01F, “Scenarios: Payroll Forms”. Provide sample W-4, I-9, and W-2 forms for students to complete using information about the two brothers in the scenario.

Activity As a review, have students complete FEFE 1.13.1.A6, “Paychecks Math” and 1.13.1.A5 “Paychecks.”

Internal Revenue Service Social Security Administration www.irs.gov/formspubs Social Security Administration www.ssa.gov/online/ss-5.html Office of the Comptroller of the Currency www.occ.treas.gov/cdd/payrollcards Social Security Online http://www.ssa.gov/OACT/ProgData/taxRates.html

TERMS

The amount of money paid for a specified quantity of labor. WAGE

A set amount of money paid for a set period of time worked. Salary

Income paid as a percentage of sales made by a salesman Commission

Money paid by customers to those who provide services. Tip

Money paid in addition to base pay, either as a reward for performance or as a share of profit. Bonus

A form of payment to an employee paycheck

An employer deposits the employee’s paycheck directly into the authorized employee’s depository institution account. direct deposit

A prepaid card that is offered to employees as an alternative to paper paychecks or directly depositing wages into an employee’s depository institution payroll card

This part lists the paycheck deductions as well as other important information. paycheck stub

The length of time for which an employee’s wages are calculated. pay period

The total amount of money earned during the pay period before deductions. gross pay

The amount of money left after all the deductions have been taken from the gross pay earned in the pay period. net pay

Money subtracted from gross pay for required taxes, employee insurance, and retirement benefits. deduction

federal withholding tax The amount required by law for employers to withhold from earned wages to pay federal income taxes. federal withholding tax

The percentage deducted from an individual’s paycheck to assist in funding government agencies within the state. state withholding tax

Federal Insurance Contributions Act Federal Insurance Contributions Act. This tax includes Social Security and Medicare. Social Security taxes are based on a 6.2 percentage of the employee’s gross income. Medicare is 1.45% of gross income. FICA

The amount an employee contributed each pay period to a retirement plan.

The amount taken from the employee’s paycheck for medical benefits.

year-to-date deductions The total of all deductions which have been withheld from an individual’s paycheck from January 1 to the last day of the pay period year-to-date deductions

A compulsory charge imposed on citizens by local, state, or federal governments. tax

The higher the income, the higher the amount of taxes paid progressive tax

They impose a higher tax rate on those with lower incomes than those with higher regressive tax

States the amount of money earned and taxes paid throughout the previous year Form W-2

An employee’s withholding certificate---the information provided on this form determines the percentage of gross pay to be withheld for taxes Form W-4

Employment Eligibility Verification Form---the information on this form is for employers to verify the eligibility of individuals for employment. Form I-9

Tax forms that report other sources of income earned during a tax year. 1099-INT- Interest income earned on savings and/or investment accounts during the previous year. 1099-DIV- Dividends earned on investments during the previous year. 1099-MISC- Income earned from self-employment, royalties, rent payments, unemployment compensation, and other sources. 1099 Forms

Journal Entry